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Wisconsin Electrical Manufacturing Co. v. Pennant Products Inc.

decided: April 23, 1980.


Appeal from the United States District Court for the Eastern District of Wisconsin. No. 78-C-423 -- John W. Reynolds, Judge.

Before Cummings, Sprecher and Tone, Circuit Judges.

Author: Tone

The issue on this appeal is whether the district court had personal jurisdiction over the defendant under Wisconsin's long-arm statute, Wis.Stat. ยง 801.05(5), made applicable by virtue of Rule 4(e), Fed.R.Civ.P. The action is in contract and subject matter jurisdiction is based on diversity of citizenship. The district court held that the case was governed by our recent Lakeside Bridge & Steel Co. v. Mountain State Construction Co., 597 F.2d 596 (7th Cir. 1979), cert. denied, 445 U.S. 907, 100 S. Ct. 1087, 63 L. Ed. 2d 325 (1980). We hold that jurisdiction exists because the defendant here, unlike the defendant in Lakeside, conducted activities in Wisconsin. We therefore reverse the judgment and remand the case for trial.

Plaintiff Wisconsin Electrical Manufacturing Company (WEM) is a Wisconsin corporation that manufactures computerized control systems for industry. Its only place of business is New Berlin, Wisconsin.

Defendant Pennant Products, Inc. is a New York corporation with its sole place of business in Rochester, New York. It is engaged in manufacturing and selling mixes, jams, jellies, and pie fillings for the baking industry. Its only contacts with the State of Wisconsin are those related to the contract in issue in this case. The other defendant, County of Monroe Industrial Development Agency, is an agency of the county in which Pennant's plant is located; under state law it is authorized to finance, inter alia, installations of equipment for industry in the county.

In 1977 Pennant contacted Fred D. Pfening Company of Columbus, Ohio, to discuss the production by Pfening of a computerized mixing system.*fn1 Pfening then discussed with WEM the possibility of WEM's supplying a computer control system to Pfening as a component of the system Pfening would supply. In July 1977 WEM submitted to Pennant a proposal for an entire computerized mixing system that included WEM's control system.

Pfening then suggested that, because of the complexities involved, Pennant and WEM deal directly with each other. There ensued a series of trips and telephone calls concerning Pennant's prospective purchase. Ultimately, in September 1977, Pennant placed an order for the equipment.*fn2 WEM accepted the order in Wisconsin by mailing an acknowledgement to Pennant but was unable to deliver on time, and the resulting dispute led to this action.*fn3

The significant contacts of the out-of-state buyer with the forum state that are present here but absent in Lakeside are visits by the buyers' agents to Wisconsin in connection with the business on which the claim is based. There were two visits: In August 1977 Pennant's vice president traveled to New Berlin to inspect WEM's facilities with a view to determining whether WEM was capable of performing the contemplated contract. In January 1978 Pennant's general manager traveled to New Berlin to meet with WEM "to discuss changes in the overall control system precipitated by changes in Pennant's bakery operation." The discussion concerned "misunderstandings"*fn4 on that subject that were ultimately resolved in later conferences not held in Wisconsin, which were followed by the transmittal in late January by WEM to Pennant of a change order. The other communications between the parties, which were numerous, occurred outside Wisconsin or by interstate mail or telephone.

The two visits by agents of the defendant to Wisconsin are enough, in our opinion, to distinguish this case from Lakeside.*fn5 The due process principle stated in Hanson v. Denckla, 357 U.S. 235, 253, 78 S. Ct. 1228, 1239, 2 L. Ed. 2d 1283 (1958), applied in our Lakeside decision, and reiterated in World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S. Ct. 559, 567, 62 L. Ed. 2d 490 (1980), is as follows:

(I)t is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.

Satisfied here is the requirement that the defendant, not merely the plaintiff, conduct activities in the forum state,*fn6 which in a contract case must relate to the formation or performance of the contract. The visits by Pennant's agents to be the forum state, first during negotiations to determine, by inspecting WEM's facilities there, whether it would be able to perform the contract, and later, while the contract was being performed, to negotiate with WEM about performance,*fn7 were not merely matters of convenience, as were the visits in Capital Dredge & Dock Corp. v. Midwest Dredging Co., 573 F.2d 377, 380 (6th Cir. 1978), and Kaye-Martin v. Brooks, 267 F.2d 394 (7th Cir.), cert. denied, 361 U.S. 832, 80 S. Ct. 84, 4 L. Ed. 2d 75 (1959),*fn8 but rather were significant in the formation of the contract and Pennant's efforts to have it satisfactorily performed.*fn9 See United States Railway Equipment Co. v. Port Huron & Detroit Railroad, 495 F.2d 1127 (7th Cir. 1974); National Gas Appliance Corp. v. AB Electrolux, 270 F.2d 472 (7th Cir. 1959), cert. denied, 361 U.S. 959, 80 S. Ct. 584, 4 L. Ed. 2d 542 (1960).*fn10

Ironically, the same court whose judgment was reversed in Lakeside dismissed this action in the reasonable belief that this case was close enough to Lakeside to be decided the same way. We appreciate and sympathize with the position of that court and other trial courts, state and federal, that must so frequently decide an amorphous federal constitutional question in order to determine whether service of process has been effective in an otherwise routine case. So long as long-arm jurisdiction reaches to the outermost limits due process will permit and so long as due process standards continue to be susceptible only of a case-by-case application, reasonable minds will differ in particular cases and the "degree of predictability to the legal system" desired by the Supreme Court, World-Wide Volkswagen Corp., supra, 100 S. Ct. at 567, will prove elusive. A strong case could be made for a set of concrete, objective standards, at least as a statutory matter, however arbitrary they might seem in individual cases, that would enable litigants to determine whether jurisdiction was present without taking the question to a reviewing court. However, applying the present standards as best we can, we think jurisdiction exists here.


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